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Britain's performance has deteriorated under the revamped system, developed in partnership with research-data specialist Thomson Reuters, although it remains a clear second to the US and well ahead of the rest of the pack.

The US, by contrast, has institutions in the top 50 and occupies the entire top five, with Harvard University in pole position.

The UK's highest-ranked institutions, Cambridge and Oxford, are joint sixth.

Despite the US dominance, the UK remains an overachiever when its performance is judged against its higher education spending, which is below average for countries in the Organisation for Economic Cooperation and Development.

A table illustrating countries' overall performance in terms of aggregate points scored by universities in the top 200 (below) shows that the UK has more than twice as many as Germany in third place.

Both countries have performed well despite their higher education spending falling below the OECD average of 1.5 per cent: the UK spends 1.3 per cent of GDP and Germany's figure is even lower at 1.1 per cent. However, the latter is planning sizeable additional spending, unlike the former.

The US is the runaway leader, with more than twice the UK's aggregate points. Its performance correlates with its level of investment: the US spends 3.1 per cent of GDP on its universities, more than any other OECD nation.

The table also shows that Canada is ranked in fourth place in terms of aggregate points scored, while China is the highest-ranked Asian nation in eighth place.

The UK sector's strong performance relative to investment comes at a time of significant concern about deep cuts to public funding, due to be announced in the government's Comprehensive Spending Review (CSR) on 20 October.

Experts have warned that the cuts are at odds with the strategies being pursued by competitor countries, many of which are investing in their universities.

Timely figures

Developed after months of consultation with the sector, THE's methodology is now designed to emphasise evidence about research, teaching and knowledge transfer.

Steve Smith, president of Universities UK, writes in the THE World University Rankings supplement that the appearance of the league table before the CSR and the publication of Lord Browne of Madingley's independent review of fees and funding is timely.

The implications of the rankings are "absolutely clear", he says. "The UK's academy has no automatic right to stay in its current position as the second-strongest system in the world. The government faces a clear choice: either continue to invest in the university system or see the UK's comparative position decline."

Professor Smith also notes Germany's additional spending of €18 billion (£15 billion) on science, research and development between 2010 and 2015, and France's extra €1.8 billion a year for research and higher education in 2010 and 2011.

By contrast, the UK's most senior civil servant, Sir Gus O'Donnell, has warned vice-chancellors to plan for 35 per cent cuts between 2011 and 2015, the period covered by the CSR. Lord Browne's review, scheduled for publication in early October, is under pressure from some universities to recommend a significant rise in the tuition-fee cap so that institutions can recoup losses in public income.

Bahram Bekhradnia, director of the Higher Education Policy Institute, said that the achievement of UK universities was "consistently extraordinarily good - all the more remarkable when expenditure levels are taken into account".

He said the government needed to be aware of two dangers. "First, the price paid in the US to attain the level of excellence that it achieves is extraordinarily high, and undoubtedly much of that expenditure is wasteful. Whatever amendments are made to the fee regime, (the UK) must not allow costs to escalate. The US should not be our comparator in that respect.

"Second, it is facile to tell universities that they should be doing more with less. They already are doing more with less, and it is more or less inevitable that requiring them to live with even less funding will damage our quality and standing in the world."

Academic resilience

Commenting on the US' continuing dominance, Philip Altbach, director of the Center for International Higher Education at Boston College, said it "shows that once you have built an academic culture, it takes a lot of banging, both from inside and outside, to shake those universities off their perches".

However, he sounded a warning that "what's going on in the US right now is extremely negative and may make it easier for other countries and institutions to do a little better".

In terms of the total numbers of universities in the top 200, Germany has gained ground on the UK by registering 14 institutions, followed by the Netherlands (10), Canada (nine) and Australia (seven).

Asian institutions make up an eighth of the top 200, with the continent's tally of 25 delivered by China (six), Japan (five), Hong Kong (four), South Korea (four), Taiwan (four) and Singapore (two).

Jonathan Adams, director of research evaluation at Thomson Reuters, said: "People will recognise that the reshaped basket of indicators that THE is using include funding as an important element at a number of points.

"The relative funding of higher education institutions in the US and the UK ultimately influences some of the changes in ranking. This reflects the relatively fragile funding position of some of the leading UK institutions."

The new rankings methodology is based on 13 indicators designed to capture a broad range of activities, from teaching and research to knowledge transfer. Two indicators use the results from a worldwide survey of academics conducted by Ipsos MediaCT, which is bigger and more representative than ever before.

However, subjective views carry less weight in the new system, counting for 34.5 per cent of total scores rather than the 50 per cent under the old system. The 2010 methodology is "less heavily weighted towards subjective assessments of reputation and uses more robust citation measures", Professor Smith says.

Also writing in the THE rankings supplement, David Willetts, the universities and science minister, agrees that the revamped system uses "more rigorous criteria".

All universities in the top 200 list are given a score in each of the 13 separate performance indicators, which are brought together to give a final overall ranking score (a cumulative probability score) for each institution. This table aggregates the overall ranking scores for every institution featured in the top 200, by country (see Times Higher Education World University Rankings supplement for full tables and methodology).

* All OECD figures are for 2007, except for Canada&#8217;s, which is for 2006, and Turkey&#8217;s, which is for 2000.